Cambodia’s Credit Growth Slows In Last Quarter Of 2016

According to the total number of new private finance, mortgage and credit card accounts opened last year in Cambodia, there was a 29 percent increase in number and a 32 percent increase in value compared with 2015.

The country’s credit growth slowed slightly in the fourth quarter of 2016, compared with previous quarters in the year, due to low commodity prices as well as a decline in mortgage loans, according to a Credit Bureau of Cambodia (CBC) report released yesterday.

According to the CBC’s Consumer Credit Performance Report, in the fourth quarter of last year consumer loans only grew by 1.8 percent compared with the third quarter. The report measures credit growth in respective quarters of the year.

The first quarter of 2016 saw the fastest credit growth of 11.4 percent, compared with the fourth quarter of 2015.

Oeur Sothearoath, interim CEO of CBC, told the Khmer Times yesterday that because the report analyses credit activity quarter-over-quarter, slight growth was to be expected in the fourth quarter of 2016.

“In general, that’s the period where there is a general slowdown in industries and less market activities. However, if we look at yearly trends based on the total number of new accounts in all three categories – private finance, mortgage and credit cards – there was a 29 percent increase in number and a 32 percent increase in value compared with 2015,” said Sothearoath.

He pointed out that the consumer credit index, included in the CBC report, only focused on consumer loans.

“Other loans, including commercial loans for agriculture, asset financing, working capital, etc. are excluded from this analysis, and from CBC’s services for the moment.”

Sothearoath said that among consumer loans, personal credit accounted for almost 85 percent of the total number of accounts in the fourth quarter of 2016.

“In our database, this includes all loans for personal purposes such as mobile phone loan, car loan, home improvement loan, education loan, and so on.”

In Channy, president and group CEO of Acleda Bank, said the slower credit growth for 2016’s fourth quarter was due mainly to a drop in new accounts from the agriculture sector, especially from farmers.

“We noted a significant fall in the last quarter due to low agricultural commodity prices, especially in the rice sector. There was a slowdown in agricultural activity,” he said.

Analyzing the CBC report, Mr. Channy said there was also a decline in mortgage loans from the construction sector in the fourth quarter.
“It seems there was also a slowdown, too, in the construction sector.”

In November, the International Monetary Fund (IMF) warned that the country’s rapid credit growth could lead to a “financial system-wide shock.”

The IMF said that the rapid expansion in credit concentrated especially in the real estate sector, posed a risk to the financial and macroeconomic stability of the country.

For the moment, however, those fears have yet to eventuate.

“The percentage of non-performing loans did increase a bit by 1.52 percent in the fourth quarter of 2016, but it is still at a manageable level,” said Sothearoath.

“In comparison to other developing countries, where the non-performing loan rates are more than two or three percent of amount borrowed on credit, there is nothing alarming for the moment.”

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